Question

Revenue cycle : sales to cash collection

Identify major threats in the revenue cycle, and evaluate the adequate of various control procedures for dealing with those threats.

Accounting information system

Answer 1

There can be various threats that can be identified in revenue cycle .The major threats along with their controls are as follows;-

Threat 1

Poor credit sales to customer

Controls

setup of an independent credit approval system in the Enterprise information system and maintaining good customer accounting

Threat 2

shipping defalcations and other errors

controls

A system should be established for reconciliation of shipping tickets with picking tickets ,bar code scanners

A application control for data entry should also be initiated

Threat 3

theft of inventory

controls

Secure the location of inventory and document transfers

release only with valid shipping orders

have good accountability for picking and shipping

periodically reconcile records with a physical count.

Threat 4

billing errors

controls

Reconciliation of picking tickets and bills of lading with sales orders

data entry edit controls

Threat 5

Loss of data

Control

Regular backups are essential with one copy stored off-site

logical and physical access controls to prevent leakage to competitors and irregularities.